CRONY CAPITALISM: Here’s How Lobbyists Are Making You Pay More for Hotels

If you’re hoping to find examples of crony capitalism, apparently you don’t have to look past your in-box where lobbyists now openly brag about their exploits and accomplishments. Let’s review the crony capitalism case of lobbyist Katherine Lugar to learn more how this Washington insider game is played.

In what has to be described as an extraordinary and brazen example, the head lobbyist for the American Hotel and Lodging Association (AHLA) emailed out in black and white a campaign to get reporters and members of Congress to act on their behalf in an effort to limit competition and choices for consumers. Only in Washington would a lobbyist brag about how an organization is using the power of government to discriminate against a competitor.

The hotel industry has become dependent on third party travel websites for bookings, forcing the big companies to pay fees to companies like Expedia.com, reservationdesk.com and others to bring in bookings. Most consumers will examine more than five different third-party websites to find the best prices and most never even use the hotel’s own sites, like Marriot.com. Lobbyists for the hotel industry have embarked on an effort to get consumers to book directly with the hotels rather than use third party portals. The hotels make more money if consumers don’t shop around before booking a room.

In order to do that, hotel lobbyists have embarked on a two-tiered campaign. The first is to get reporters to write scare stories about third party travel websites. According to Katherine Lugar, the head lobbyist for the big hotel chains, their “media efforts…have exceeded 80 million media impressions,” and the “latest news stories include a recent news segment on CBS This Morning by consumer advocate Peter Greenberg,” as well as stories by the Washington Post, LA Times and Mainstreet.com. A common thread of these stories is discussions of the “dangers” of using third party travel sites.

What these reporters aren’t telling consumers is the hotels lose money when they rely on third party sites, which they claim are “deceptive” because consumers cannot tell whether the sites are Expedia or Marriot.com. This campaign is centered on lumping legitimate sites in with illegitimate phishing sites.

Phase one of the campaign is a campaign in the media to sling mud at emerging technologies that are being used by consumers to save money.

Once the line was baited, the lobbyists turned to friends in Congress to force government on their side. Phase two of the campaign is to use the media stories to motivate members of Congress to call for an investigation. An investigation will slow down competition and allow the hotel king pins to limit competition using the power of the federal government.

Sen. Chuck Grassley, the Chairman of the Senate Judiciary Committee wrote a letter to the Federal Trade Commission demanding action on these “deceptive hotel booking sites.” According to Mr. Grassley, “consumers have found themselves inadvertently booking hotel rooms online with third-party companies that they initially believed were the official websites of well-known hotel chains.” This is, of course, malarkey, but you can’t blame Sen. Grassley for believing the news sites that were promoting this false claim.

If you use a search engine and type in, for example, “Marriot Phoenix,” Marriot sites will come up but so will sites linked to Travel Advisor, Hotels.com and Yelp — all third party sites. How is it “deceptive” to book through those sites rather than the Marriot site? The true deception is for the hotel lobbyist to deceive Members of Congress into calling for an investigation.

This is all a classic example of cronyism and a glimpse into the window that is Washington. By cutting off access to third party sites, you are cutting off access to competition. That hurts consumers.

The lobbyists might be proud of their accomplishments but they are harming their customers in the process. If hotels cannot wean themselves off of their own “hotel cocaine” they seem intent on getting the government to do it for them. Consider this post a glimpse into how Washington is working against average Americans who only desire to save money when they book a hotel room.

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